Business transfers, employers’ strategies and the impact of recent case law

Published date01 August 1999
Date01 August 1999
AuthorRichard W. Painter,Stephen Hardy
Employee Relations,
Vol. 21 No. 4, 1999, pp. 378-388.
#MCB University Press, 0142-5455
Received: March 1999
Accepted: May 1999
Business transfers, employers'
strategies and the impact of
recent case law
Richard W. Painter
Staffordshire University, Stoke-on-Trent, UK, and
Stephen Hardy
University of Salford, UK
Keywords Compulsory competitive tendering, Employee rights, Employment contracts,
Employment law, European Union
Abstract Under the European Union's 1977 Acquired Rights Directive, workers transferred to
another employer can expect the majority of their original terms and conditions of employment to
be protected and changes made without consultation can constitute constructive unfair dismissal.
Confusion over the application of the directive greatly affected the introduction of compulsory
competitive tendering to the provision of local authority services in the UK. Many of the issues
remain unresolved and will cause problems as compulsory competitive tendering is replaced by the
duty on authorities to ``achieve best value''. This article seeks to clarify the position for employers
by reviewing the most recent case law from both British and European courts.
The 1977 Acquired Rights Directive (ARD) was tardily implemented by the UK
by the Transfer of Undertakings (Protection of Employment) Regulations 1981
(TUPE). The directive provides consultation rights for workers transferred to
another employer and protection of their pre-transfer terms and conditions of
employment, pension rights being an exception. Any unilateral changes to
these terms and conditions made by the new employers makes them liable for
constructive unfair dismissal. Moreover, any dismissals in connection with the
transfer are automatically unfair unless they can be justified by ``economic,
technical or organisational'' reasons. In many EU member states there had been
existing equivalent protection and for this reason , and since the directive does
not apply to share transfers, initially the ARD aroused little interest or concern.
However, in the UK the introduction of compulsory competitive tendering
(CCT) dramatically increased the potential applicability of this directive.
Confusion over whether the ARD was relevant to CCT transfers has been
claimed to have significantly distorted competition in the UK market for local
authority services[1]. Unless resolved, the uncertainties relating to the scope of
the law relating to transfers of undertaking are likely to continue to cause
problems when CCT is abolished and replaced by a statutory duty on the part
of local authorities to make arrangements for the achievement of best value in
the performance of their functions[2].
A survey of 68 employers recently involved in transfers conducted by
researchers in the Institute of Industrial and Commercial Law, Staffordshire
University, revealed widespread non-compliance with the ARD (see Hardy et
al., 1998; Cotling, 1998; Adnett et al., 1995; Adnett and Hardy, 1998). Any post-
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